Recognition (AASB20_09-26)

Except as specified in paragraphs 29 and 31, an entity shall recognise: 

(a) all regulatory assets and all regulatory liabilities existing at the end of a reporting period; and 

(b) all regulatory income and all regulatory expense arising during a reporting period.

If there is uncertainty about whether a regulatory asset or regulatory liability exists, an entity shall assess whether the regulatory asset or regulatory liability is more likely than not to exist. If the regulatory asset or regulatory liability is more likely than not to exist, and meets the criteria specified in paragraph 29 or 31 if applicable, the entity shall recognise it.

Uncertainty about the existence of a regulatory asset or regulatory liability might arise from uncertainty about the existence of a present right or present obligation, uncertainty about the enforceability of the present right or present obligation, or uncertainty about both existence and enforceability. The existence of a present right or present obligation does not need to be certain for an entity to be able to assess its enforceability. An entity shall consider both types of uncertainty and make a combined assessment of whether it is more likely than not that an enforceable present right or enforceable present obligation exists.

An entity shall recognise a regulatory asset or regulatory liability arising from regulatory depreciation of a regulatory capital base if, and only if, the regulatory capital base has a direct relationship with a related item or items (see paragraph B59). A related item is an item that gives rise to amounts for which a regulatory agreement creates a right to compensation to be provided, or an obligation for a deduction to be made, through regulatory depreciation.

An entity’s regulatory capital base has a direct relationship with a related item or items if the entity is able to track, by amount and reporting period, how regulatory depreciation provides compensation or makes a deduction for the amounts arising from the related item or items (see paragraphs B60–B72).

Compensation for an allowable expense might be based on a benchmark (for example, the actual expenses of an entity’s peer group). In some cases, the benchmark is determined using unobservable inputs, and the regulator determines the compensation only after the entity’s financial statements are authorised for issue. In such cases, an entity shall recognise any resulting regulatory asset or regulatory liability only when the regulator determines the compensation based on the actual benchmark.